November 20, 2017

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FSR Welcomes Treasury Report on FSOC Designations

Adopting these significant reforms through rulemaking—rather than as guidance—would ensure the Council has the benefit of meaningful commentary from regulated entities and the public.

FSR Welcomes Treasury Report on FSOC Designations
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FSR Welcomes Treasury Report on FSOC Designations 

 

WASHINGTON – The Financial Services Roundtable (FSR) welcomes a Treasury Department report outlining recommendations to modernize and reform the Financial Stability Oversight Council (Council) designation process for nonbank financial companies.

“The Treasury report includes several recommendations to modernize and reform the Council’s designation process and increase regulatory transparency and accountability,” said Felicia Smith, FSR’s Vice President and Senior Counsel for Regulatory Affairs. “Adopting these significant reforms through rulemaking—rather than as guidance—would ensure the Council has the benefit of meaningful commentary from regulated entities and the public. We look forward to working with the Administration and policymakers to move these recommendations forward.”

The report highlights FSR priorities for promoting financial stability and economic growth including:

  • The Council should focus on “activities and practices within an industry” that may pose risks to U.S. financial stability.
  • The Council should enhance its coordination with and reliance on primary financial regulators to mitigate systemic risks.  Individual companies should be considered for designation only after the Council consults with the primary financial regulator. 
  • The Council should reform its designation analyses to include an assessment of the likelihood of a company’s material financial distress.  The Council also should conduct a cost-benefit analysis, which would avoid imposing costs on the company that are disproportionate with the anticipated benefits of designation.
  • The Council should improve engagement with companies under review for potential designation and with their respective primary financial regulators. The Council also should improve transparency to the public concerning the designation process and the basis for its determinations.
  • The Council should provide a clear “off-ramp” for designated nonbank financial companies, which would allow them to develop and submit a risk mitigation plan that addresses the Council’s concerns.  The off-ramp would enhance the stability of the financial system by providing a process for companies to reduce systemic risks identified by the Council.

 

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About The Author

The Financial Services Roundtable represents the largest integrated financial services companies providing banking, insurance, payment and investment products and services to the American consumer. Member companies participate through the Chief Executive Officer and other senior executives nominated by the CEO. FSR member companies provide fuel for America’s economic engine, accounting for $92.7 trillion in managed assets, $1.2 trillion in revenue, and 2.3 million jobs.

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